Josie 's Key Ideas from The Age of the Platform
by Phil Simon

American companies no longer enjoy local advantages and must now compete against companies from other countries that might have cheaper labour or less regulation. No business is safe from these changing market forces.

Technology has lowered barriers to entry, making it easier and cheaper for new businesses to start up, meaning many businesses are now competing with one another all over the world. This might be great for new startups in Zambia, but it also means erosion of traditional businesses. Everything is undergoing realignment, which is good for some, but bad for others.

A platform is an ecosystem that scales easily and encompasses features, users and partners. Platforms allow people to contact each other and exchange information. They make third party collaboration much easier. The platform is a business model.

Even large companies can be platforms. In a beneficent (as opposed to vicious) circle, platforms generate network effects which make the platforms more popular, which generate more network effects.

Monopolies don’t socially optimise resources. Monopolies create barriers to entry, effectively preventing meaningful competition. There’s the controversial notion of natural monopolies when barriers to entry are so high that really only one company can succeed.

AT&T is an example; back in the day, they were pretty much the only phone company. They had a complete monopoly. Some people say this is just a natural result of market circumstances, so it’s cool. Others say the whole idea is in error.

• Platforms aren’t monopolies, as they have a low barrier of entry and do not lock users in.
• Platforms don’t have the kind of power in people’s lives the way that monopolies are disposed to have, so they don’t generate the same level of hatred.
• Platform companies tend to have price discrimination, which is to say that the different sides pay different charges.
• Information technology platform firms are different from monopolies.

Amazon was predicted to fail in 2001. In response, founder Jeff Bezos decided to grow the company as fast as possible. By 2002, it was the first retailer to make a profit on internet commerce. Today it’s a big success.

It’s helpful to have First Mover Advantage (FMA). Being the first company to make a significant move in a market puts a company at a distinct advantage.

Customer experience is important. Amazon puts lots of effort into providing good customer service. The importance of customer experience is magnified due to the potency of network effects.

Amazon asks for permission when it uses people’s info. This is a good thing to do. They also let people opt out of their emails. Users are encouraged to feel that their concerns matter to the company.

At one time, it took 12 clicks to buy something on EBay. In 1997, Amazon introduced 1-Click transactions. They managed to reduce a lot of transaction friction and people gravitated to the site.

How a platform enables smoother and faster transactions is one of the most fundamental ways it can promote customer adoption.

Powerful business intelligence software allows the site to make relevant suggestions to users without the clutter of ads the users might not appreciate. Users can rate the products they purchase.

In fact, they can even rate products that they didn’t purchase on the platform. The rating system takes advantage of network effects and allows the site to be even more accurate in the products it recommends to individual customers.

• Once upon a time in 1977, there were three fellows, Steve Jobs, Steve Wozniak and Ronald Wayne. They started a little enterprise called Apple Computer. 
• Famously, Jobs was forced to resign in 1985, only to return to the company in 1997.
• In the mid-1980s, the company started developing other devices in addition to computers. They designed cameras, CD players, speakers and many other high tech gadgets.
• By the early 2000s, the company was much more than a computer manufacturer.

Good design is part of the brand; Apple products look good and they don’t have extraneous bells and whistles. They are intuitive and straightforward.

Simplicity, ease of use and enjoyment are the qualities that made Apple products great. These are also the qualities that make for great platforms. Products like the iPhone allowed partners to create apps, and so Apple became a platform company.

The App Store has made a lot of money for Apple.

They opened the Application Programming Interface (API), and now the App Store lets them grow even more without having to pay for developers, programmers, servicers or anyone else for these apps. Open APIs made innovation happen faster. Like other major platform companies, Apple figured how to monetize its ecosystem besides selling hardware and software.

Founder Mark Zuckerberg is a platform genius. He knew right from the beginning that he wanted the site to be a platform, back when no one was thinking like that. It was founded in 2004 by Zuckerberg and two others.

He learned from other websites that were gigantic failures and made sure that:

• Facebook loaded fast.
• It was scalable.
• It had authentic identities of everyone to deter fraud.
• It had various mini platform planks like games, ads, fan pages, messaging and news feed.

Sergey Brin and Larry Page incorporated Google in 1998. It didn’t take them long to realise that their search engine was limited. Even if they could search and index the web with breathtaking speed and efficiency, people would use the site more if it did more than simply search.

Google added lots of features beyond simple keyword searches, sometimes growing so fast that its purposes defied logic or planning. For example, they scanned the contents of libraries without getting copyright permission from publishers.

Google has many planks. This keeps users on its platform. This includes planks such as mobile, maps and streaming video. They continue to add more products.

As Amazon, Apple and Facebook did, Google has grown by moving sideways. They also monetized the platform with ads; additionally, they raised revenue by charging to bring up companies on user searches.

• Google offers a diverse range of services.
• It has deep personalization with the users.
• The search algorithm is tailored and fine-tuned to perfection.
• They offer a majority of their services for free.

There are many properties these four platforms(Apple, Google, Amazon and Facebook) have in common.

• They all have dynamic stability, meaning they are stable and yet always changing.
• They are adaptable.
• They’re all dependent on data and technology. They collect lots of information about people because that helps them make decisions and function better.
• They understand their customers. 
• They have lots of partners because that grows their businesses.
• They take advantage of network effects.
• They have communities that are really engaged.
• They benefit from positive feels and have virality.

Facebook pioneered the like button, and now it, or something very much like it, is ubiquitous across the internet. Everyone borrows each other’s good ideas.

Platforms should also cultivate stickiness, provide lots of different features so that it’s convenient for users to stay on the site as they engage in a variety of activities. The longer people are kept on the platform, the better.

Major platforms tend to have well known “rock star” executives at the top. Think of Zuckerberg, Bezos, and Jobs. These people didn’t become household names just like that. Platform companies have visionary leaders. They aren’t democratic. Decision making can be done quickly when leadership is strong and there are few protocols requiring them to gain consensus. Once a decision is made, these leaders can then ensure that the decision is acted on.

Platforms magnify the power of brands. Platform brands can become so powerful they are verb branded, that is to say, the firm’s name describes their core activity.

For example, googling. For Google, this happened because they did their job better than their competitors. The brand has become seared into public awareness.

• Platforms can offer multiple products and services, which can save customers time from having to go to different places. This will keep your customers from going over to your competitors. 
• Your customers will be grateful to have the convenience of having everything in one place, and their loyalty will continue to grow.
• Platforms can help to grow your business in ways that you could never have foreseen. 
• Sometimes a platform will start a side business that becomes more and more lucrative and important than the original enterprise ever was.

Platforms can react quicker to changing conditions than traditional firms. New products can be launched faster. They can respond with great agility to unexpected trends. In a world of continuous change, the ability to be light on one’s feet is essential.

Don’t let your company languish in the technological Stone Age. Your competition is probably already working on a platform right now.

While platforms are a great business model now in its ascendancy, that doesn’t mean that they are free of problems. Like any field of human endeavour, there is plenty of room for shortcomings and failure. Platforms aren’t always successful, for one thing.

Sometimes they never get off the ground, sometimes they crash and burn. Platforms have their limits. They can’t sell bad products any more successfully than a traditional business can.

Platforms aren’t a perfect solution to all the world’s ills. Lots of people dislike any given platform for any number of reasons. Just because an enterprise is a platform is not a guarantee it will do well. Many platforms are unsuccessful and fail. Some examples of platform failures include Microsoft, AOL, Yahoo!, Myspace, eBay and Enron. We can learn quite a bit from studying the failures of others. 

Although some of these companies have survived in the long run, they all have missed important opportunities in ways that caused them significant damage.

• Stay simple and as minimal as possible.
• Eschew bureaucracy. Act small.
• Traditional companies get bogged down in rules and paperwork that can really hinder innovation.
• Nurture the community on your platform by staying open and collaborative. 
• Look for extensions — new planks — that fit with your core activity. 
• Make intelligent acquisitions.
• Develop lots of ideas. Take small risks. Go down that path to see if it leads somewhere.
• Maintain core business operations even though you innovate too.
• Understand that you’ll fail frequently.

Perfectionism can be an obstacle to getting things done. Of course, you want to provide a quality product, but at some point, you have to let it go. Focusing on total perfection slows you down. By the time your product is perfect, it might well be obsolete.

Start with the greatest capacity that you can. Excess is good. That way you can handle unexpected spikes. That way you can scale up when the time comes.

It’s dangerous to cling to safety. Embrace risk. It’s safer.

When you see an opportunity, move quickly. Patience is good in many ways when you build a platform. However, most opportunities don’t stick around for long. The secret is in knowing the opportunities that will best serve your platform and jumping on them quickly.

Take advantage of existing planks. It’s a lot of work creating new planks from scratch. External websites, emails, blogs, applications and open source tools can all be harnessed to benefit your platform.